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HAPPY NEW YEAR 2016!
New Address, New Market, New Rules, & New GREEN Innovations:
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As I approach a milestone 300th transaction and receive a Top 10% Producer Diamond Club award for 2015, I want to thank my many loyal and appreciative clients for their continuing business and referrals!
“Steve’s service is second to none, by far the most helpful agent in this business. I have dealt with many agents, and no one has been as thorough or willing to work as hard as Steve to make the deals go through. Always look forward to further deals, as it is always a pleasure to do business with him. Thank you Steve for the hard work and dedication.” R.D. Portfolio Investor
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New Address:
- Please note my new address above. Our Paradise Valley office closed after the new World Headquarters building was completed in Scottsdale; a state-of-the-art facility with the latest in technology, and well-appointed conference and meeting rooms.
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New Market:
- Homes under $1M ended the year favoring Sellers at the low-end of below $300k. A balanced market put Buyers and Sellers on an equal footing in the market segments from $300k to $1M. Overall comparing 2015 to 2014, inventory fell 6%, sales were up 4% and prices appreciated on average of 6.5%.
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- The Luxury Market $1M+ was a different story comparing 2015 to 2014. An already Buyer favorable market increased the inventory 9% and sales were off 10%. The good news: prices held even with the oversupply. This segment is more sensitive to the stock market and global commodity markets which both acted to lower Buyer expectations softening already weak demand. That said, real estate is still the best alternative investment for wealth building and this fact is reflected by the surge in acquisitions by affluent foreigners especially from China.
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- The election year ahead will most significantly impact the Luxury Market $1M+, as lower earnings expectations, stock market jitters, international tensions continue, and global commodity prices tumble. In spite of all these factors, it will be a good year to buy a luxury home as Sellers will be facing downward price pressure from oversupply and jumbo interest rates remain below 4%.
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- First-time homebuyers within the FHA loan limits are facing a severe decrease in inventory of quality homes under $300k. Credit appears to be loosening as borrowers regain equity in existing homes, rates remain low, and new loan products are created to serve the broader market.
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- The mid-range market from $300k up to $1M serving affluent first-time buyers, vacation/second home, move-up, and empty nesters produced favorable results as well. Sales up 23%, price appreciation 3% and inventory up 7%. Quality homes in this category tend to sell quickly, particularly those in the best zip codes and best school districts.
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- Investors are also facing a severe shortage of investment grade SFR assets under $175k. This is not likely to change anytime soon, so adapting strategies to expand investment asset classes. For example, investors are looking towards new build in-fill projects as a strategy to satisfy investment goals for the years ahead. Diversifying into commercial, multi-family and retail requires additional capital and investment expertise, but offer upside potential and spread the investment risk across asset classes. In-fill land has limited supply and demand is tied to the builder’s ability to build new product adapted to higher density and urban locations.
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- Landlords will continue to enjoy strong demand as rental inventories continue to shrink. This means upward pressure on rental rates and new challenges for tenants. A substantial flow of apartments geared to the Luxury Market are in the works, so rentals in that segment will face some downward pressure.
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New Rules:
- Interest rates remain at historic lows and have already fallen back from the Fed’s anticipated but recent rate hike. New rules regulating lender loan disclosures, referred to collectively as TRID, may cause some short term delay in the closing process as the industry adjusts. The FHA and the lending industry are implementing changes focused on easing credit and underwriting standards extending homeownership to more families that were previously excluded.
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- Also, on December 18th, 2015, Congress acted to extend The Mortgage Debt Relief Act through 2016 and retroactive to 1/1/2015. This will help the ‘tail end’ of the distressed market to close out the year and mitigate the IRS tax impact of a short sale or foreclosure in some cases.
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New GREEN Innovations:
- Wider interest in all things technology and related to GREEN build will continue to grow as innovation and disruptive technologies make major strides in energy efficiency, renewable energy production, and energy storage. In addition, a severe labor shortage in the building industries is forcing innovation in building materials and methods.
- Momentum is building to leapfrog the utility company monopoly stranglehold suppressing solar expansion in Arizona. SolarCity has filed suit to reverse the crippling effect of SRP’s regressive fee structure on existing and future solar panel installations. This is further evidenced by APS requesting the Arizona Corporation Commission permit a study of energy storage technologies…like the PowerWall announced by SolarCity.
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- New building methods and materials, like 3-D printing will continue to evolve. This is particularly critical considering the profound lack of attention major home builders are focusing on affordable housing.
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- Tiny homes and high quality modular construction are expanding globally and in the US, albeit slower in the US because of arcane zoning ordinances and bureaucratic processes in place that no longer serve the emerging market trends.
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FOUR YEAR STATISTICAL SUMMARY
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SOURCES: Michael Orr, W P of Business Carey School, The Cromford Report, The Information Market,
ARMLS - the most accurate and comprehensive Arizona Real Estate Statistics and Data available.
Phoenix Business Journal, The Rose Law Group /Belfiore – Dealmaker.
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